The Government is to launch a new type of subsidised savings account to help low-paid workers save money, it has announced
The Help To Save accounts will be available to people on incomes low enough to claim Universal Credit or tax credits.
Workers with money to save can add £50 a month to the accounts and after two years the amount of money in them will be topped-up by 50 per cent to a maximum of £600.
The scheme can then be used for another two years, with the same maximum bonus applying again after a total of four years.
The new accounts will sit alongside ISAs, which provide all earners with a limited amount of tax free savings. Withdrawals can be made from the account at any time.
“I've made it the mission of this government to transform life chances across the country,” said David Cameron
“That means giving hard-working people the extra support they need to fulfil their potential.
“And that's what these new measures will achieve - helping someone start a savings fund to get them through difficult times, giving people on low incomes a pay rise and making sure teenagers have the experience and networks to succeed.”
Chancellor George Osborne also announced the scale of October’s scheduled rise in the National Minimum Wage for young people. The rate, paid to under-25s, will rise by 3.7 per cent to £6.95 an hour.
Using the new account could be risky for people on low income because people who have savings of more than £6,000 begin to reduce their entitlement for various benefits.
Anyone who manages to save over £16,000 has their entitlement to most benefits stopped completely – even if their income is still very low.
Around half of UK adults have less than £500 set aside for emergencies, research cited by the Government suggests. Many families on low incomes will likely be unable to save the full amount.
Last year the Government launched a similar savings account for people looking to buy a home. Help To Buy ISAs give savers a 25 per cent cash bonus when money in them is used to buy a house – up to £3,000.
The Chancellor will confirm the new Help To Save meausure in his Budget, which is on Wednesday.
